“I think in Lombard Odier’s mind when they transferred me from institutional side to the private bank was to transfer some of the best practice of the institutional side in terms of delivering performance and risk management towards the private world.
“The private banking business is becoming more competitive with consultants comparing the performance of various banks. The idea from my career is to transfer some of the knowledge from the institutional side – the strong investment processes and so on – towards the private bank.”
Monier’s risk-based investment strategy allocates equally across five risk factors – developed equities, emerging equities, commodities, credit, and duration – while acknowledging the bank’s history of wealth preservation with an explicit maximum drawdown.
“Our history is that we were a rich private bank for rich European industrial families who were much more concerned about capital protection and preserving their wealth than making more money, and in a sense, we are still quite risk adverse today,” he says.
“For the past 15 to 20 years our client base has become more diverse with more clients coming from emerging markets – Latin America, Middle East, Russia and Asia – who are more prone to take risk. They can have returns of say 15% in their own home market, so if you tell them you are going to deliver cash plus 2% they will laugh at you.
“Our offering has changed from historically being very conservative to a more diversified offering where we try to understand exactly the risk tolerance of the client and propose a strategy which is adapted to it.”
He adds: “A lot of the traditional asset allocation methods think in terms of weights in a portfolio. If we say a balanced portfolio is 50% in fixed income and 50% in equities, things are not clear in terms of risk because equities are much more volatile. Your risk is probably 90% equity risk and 10% fixed income risk. A portfolio that might appear diversified is actually not diversified”.
Monier says it is this prudence that has served the bank well historically – today 47% of its business is discretionary accounts, which is rare for a private bank with an industry norm of 15% to 20%.
